FRANKFURT German chipmaker Infineon brightened its gloomy outlook for this year, citing orders from carmakers hoping sales of higher-spec models in China will offset flagging demand in Europe.
The company, whose chips activate airbags, enable cruise control and cut emissions among other functions, said it expected 2013 revenue to drop by five percent on last year instead of up to 9 percent.
Infineon said it expected its 2013 revenue to come in at the high end of its previous target range of 3.56-3.71 billion euros. Analysts polled by Reuters expected Infineon to reach 2013 sales of 3.7 billion euros.
The company also said its 2013 core operating profit margin would reach the upper end of its 5-9 percent range.
"The trough is behind us," Chief Executive Reinhard Ploss said in a statement. "Our order books are filling up, albeit still with a relatively high proportion of short term business."
The upbeat tone of the company chimes with peers in a sector that has suffered from a post-financial crisis as demand collapsed from industry and cars to consumer electronics.
Earlier Texas Instruments forecast growth for the current quarter on improving demand for its chips.
Although the global automotive industry is still battling a slump in sales, especially in Europe, Infineon said revenue levels had recovered at its automotive unit, which accounts for about half of its revenue.
The Neubiberg, southern German-based company said its automotive business was benefiting from global trends to make cars safer, cleaner and more energy efficient. Such technology is often implemented first in premium cars.
"The number of chips used in these premium cars is 3-4 times higher than in mid-size and small cars," said Arunjai Mittal, member of Infineon's management board.
"We expect this premium segment to continue to grow this year, so we should continue to benefit from that trend," he said, adding demand from China was offsetting weakness in Europe.
Infineon declined to give more details of its orders but said the book-to-bill ratio at all its units was above 1, which means more orders were received than filled, indicating strong demand.
A Credit Suisse survey last month showed sales by Chinese luxury car dealerships increased 17-22 percent during the first quarter and the analysts said they expected luxury brands in China to maintain strong sales in 2013.
Infineon also said it expects revenue for the current fiscal third quarter to be around 1 billion euros, with an operating margin of around 10 percent.
Infineon shares jumped 9 percent in by 6:30 a.m. ET at the top of a 0.1 percent weaker European technology index.
The company's adjusted operating profit in the three months to March fell 53 percent to 68 million euros, beating the most optimistic estimate in a Reuters poll with an average expectation of 51.3 million euros.
(Reporting by Harro ten Wolde; editing by Christoph Steitz and Philippa Fletcher)